GST ON EMPLOYEE CANTEEN SERVICES- GST AAR GUJARAT

GST ON EMPLOYEE CANTEEN SERVICES- GST AAR GUJARAT

GUJARAT AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

Case Title: Suzuki Motor Gujarat Pvt. Limited (GST AAR Gujarat)

Advance Ruling No. GUJ/GAAR/R/2024/06
Date of Judgement/Order: – 3rd February 2024

ISSUES RAISED

1. Whether GST is liable to be discharged on the portion of the amount recovered by the applicant from its employees towards the canteen facilities provided to them?
2. Whether the applicant is eligible to avail input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to its employees?
3. Whether the applicant is eligible to avail input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees on deputation and on business travel and temporary workers?
4. Whether applicant is eligible to avail input tax credit in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities to its employees?

IMPORTANT PARAS

Para 17. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, un-less a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act.
Para 30. It is evident that the instant case in respect of temporary/contract workers, employees on deputation and employees on business travel, does not pass the test of employer-employee relationship and therefore does not fall within the ambit of entry I of Schedule III of CGST Act, 2017.
Para 34. Thus, even though, there is no profit as claimed by the applicant on the supply of food to its contractual worker, employees of SMC on deputation, employees of MSIL on business travel, there is indeed a “supply”, as provided in Section 7(1)(a) of the CGST Act, 2017. The applicant would definitely come under the definition of “supplier”, as per sub-section (105) of Section 2 of the CGST Act, 2017.
Para 36. In view of the above we hold that recovery of amount from such employees/worker on account of third party canteen services provided by the applicant to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees whoare on third party roll working within the factory premises] would fall within the ambit of the definition of ‘outward supply’ as per section 2(83) of the CGST Act, 2017 and is therefore, liable to tax as a supply under GST.
Para 38. In view of the foregoing, we hold that ITC will be available to the applicant in respect of food and beverages as canteen facility is to be obligatorily provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees is concerned. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only. Our view is substantiated by the ruling of the Gujarat Appellate Authority for Advance Ruling order No. GUJ/GAAAR/Appeal/2022/23 dated 22.12.2022 in the case of M/s. Tata Motors Ltd, Ahmedabad.
Para 40. In respect of the findings recorded in para 36 supra, wherein we have held that recovery of amount from such employees/worker on account of third party canteen services provided by the applicant to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises] would fall within the ambit of the definition of ‘outward supply’ as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST. However, in terms of section I 7(5)(b)(i), ITC is restricted in respect of supply of food and beverages. Thus, the applicant is not eligible for ITC in respect of the GST charged by the CSP for the canteen facilities provided to employees on deputation, employees on business travel and temporary/contract workers in terms of section 16 of the CGST Act, 2017.

RULING

1. GST is not liable to be discharged on the portion of the amount recovered by the applicant from its permanent employees towards the can-teen facilities provided to them in terms of para 22 & 23. However, recovery of amount from employees of SMC on deputation, employees of MSIL on business travel and temporary workers I including team lease employees who are on third party roll working within the factory premises] would fall within the ambit of the definition of ‘outward supply’ as per section 2(83) of the CGST Act, 2017 and therefore, is liable to tax as a supply under GST in terms of para 36.
2. The applicant is eligible to avail input tax credit in respect of the GST charged by the canteen service provider for the canteen facilities provided to its permanent employees in view of the provisions of Section 17(5)(b) as amended effective from 1.2.2019 and clarification issued by CBIC vide circular No. 172/04/2022-GST dated 6.7.2022 read with provisions of section 46 of the Factories Act, 1948 and read with provisions of Gujarat Factory Rules, 1963. ITC on the above is restricted to the extent of the cost borne by the applicant for providing canteen services to its employees, but disallowing proportionate credit to the extent embedded in the cost of goods recovered from such employees as mentioned in para 39.
3. The applicant is not eligible to avail ITC in respect of the GST charged by the canteen service provider for the canteen facilities provided to employees of SMC on deputation, employees of MSIL on business travel and temporary workers [including team lease employees who are on third party roll working within the factory premises in terms of para 40.
4. The applicant is not eligible to avail ITC in respect of the inputs i.e. equipment and kitchen utensils utilized for providing canteen facilities in terms of para – 44.